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Get agreement to the Greek (debt)

Reports suggest that Greece are doing their homework ahead of today’s European summit. Following a call between Tsipras, Merkel and Hollande yesterday, Greek negotiators were talking with institutions into the early hours of this morning.

What we think we’re going to get is a six month extension based on agreed reforms from Greece. Greek finance minister Varoufakis has said that ‘we are prepared to compromise, but we are not prepared to do what previous governments have done, take on new debt with conditions that leave little hope’.

A six month extension would see the settlement of the current extension, giving Greece the resources to pay the IMF by the end of the month and then €11bn in disbursements over the next six months, probably contingent on measurable action being taken in Greece – which also sounds a bit like a can being kicked down a very expensive road! One person close to Alex Tsipras has expressed his desire for the IMF not to be involved in the next deal, saying the IMF has “an agenda which is not at all European” and the Washington based institution has “no place in Europe”.

Greek banks are expected to open today, though the head of the Greek central bank has warned the country’s bank chiefs to expect a very difficult few days if no deal is reached.

We missed this Telegraph article on Friday morning, Click here but think it definitely warrants a read to see the argument from the Greek side of things. We too are probably guilty of looking at the crisis at a distance and commenting on the all to easy observations, but this does show an interesting side to what has been going on.

All this talk of a deal has seen tentative stock buying in Asia overnight, with fairly modest gains across the board. China’s stock market is closed for a national holiday and, after 13% fall last week, could do with the extra recovery time.

 

Black rock have said that they see Australia forced to make further rate cuts this year, as their economy struggles with falling demand from China and a lack of domestic consumption. The RBA, who are reluctant to take rates into ultra low policy levels like most of the rest of the world because pensioners get such a bad deal, have had to make cuts to the lowest levels aussie rates have ever been and by the sounds of it will have to act against their ideals to cushion the fall. This, Black rock say, could force the aussie dollar below 70 U.S. Cents, some 10% lower than where it’s currently trading.

 

Today’s data sheet is almost entirely empty, so it’s going to be all about the Greeks. This outcome will also set the tone for the rest of the week and probably the summer months too -which is why we expect the extension to be agreed.